As the middle class grows in size around the world, the ability to pay for better medical care – and awareness of the role health insurance can play in making such care possible – is also growing. At the same time, the ranks of Western expatriates living in far-flung regions, often with their families, have added to the demand for high quality international private medical insurance (IPMI). Charlotte Beugge investigates…

Whether provided by employers or taken out by individuals, international private medical insurance is essential for those working abroad – unless they are willing to risk ending up with massive bills for treatment, should an unexpected accident or illness befall them.

After all, badly break a leg in the US could mean a bill of more than £500,000 (US$617,000), including an air ambulance back to the UK, according to the Association of British Insurers. Even given the UK’s recently soaring house prices, that’s more than double the cost of the average British home.

Current estimates are that the international private medical insurance industry is worth around US$12bn in premiums a year – and it’s growing, experts say, in spite of the uncertain global economy.
But it’s a challenging environment for those in the business of international private medical insurance (IPMI) as well: fast-rising medical inflation affects premiums, and if that weren’t enough, insurers face an uphill battle trying to distinguish themselves from their rivals through the services they offer.

What’s more, the range of premiums is huge. According to the 2016 Cost of International Health Insurance Report from Pacific Prime, annual premiums range from US$17,335 in the US down to US$7,608 in Mali. (See related story here.)

The Pacific Prime survey looked at the rates charged by the top 10 insurers worldwide, which together account for roughly 70% of the total plans sold , and include such names as Aetna International; Allianz Worldwide Care; AXA PPP International; Bupa Global, and Cigna Worldwide.

In general, private medical insurance for employees of large corporates – cover for 1,000-plus employees, say – is handled by the larger companies.

Then there are managing general agencies, or underwriters, which do everything – such as administration and claims handling – with only the policy risk held elsewhere. These companies tend to specialise in particular areas or sectors, and insuring the employees of smaller companies.

Getting reliable data on the size of the international private medical insurance market can be as challenging as getting some patients to reveal their actual dietary and drinking habits. However, the so-called Big Five – Bupa Global, Cigna Global Health, Aetna International and Allianz Worldwide Care – count their policyholders in the mid-to-upper hundreds of thousands at least.

The IPMI counting conundrum

Part of the problem with counting the numbers of IPMI plans is that international private medical insurance can also include local policyholders.

As a result, “measuring the international private medical insurance market is extremely difficult,” Nigel Oliver, head of pricing at AXA PPP International, says.

“As global mobility has increased, more and more insurers have started to offer some type of global coverage that can be purchased by expats as well as local nationals. Expats no longer need to rely on the major insurers for cover: they can choose cover from local providers and brokers, who may offer regional or cross border cover.

“These days, it’s difficult to decide what is classed as ‘domestic’ and what is ‘international’ insurance – therefore it’s difficult to accurately to put a figure against it.”

However you count it, though, Aetna International’s director of sales, Damian Lenihan, reports that business is good at the moment, even if it has been challenging at times in the fairly recent past.

“The market was down after 2008, 2009, as organisations reined back on sending staff overseas,” he reports.

“Added to that, companies involved in oil and gas and construction industries are the most likely to have employees overseas, and these industries were hit hard by the global recession.

“However, the market has now largely recovered.”

In fact, Lenihan adds, Aetna International has just had “one of the best years we’ve ever had since entering the international private medical insurance market”, helped by new business coming in “from customers switching over to us, and also new businesses buying IPMI for the first time”.

Healthy prospects

Although no one can predict the future – and that includes the future movements of people across national borders for work, retirement, study and leisure – many experts believe the IPMI market is certain to continue to grow steadily.

A recent report by HSBC’s Expat Explorer research organisation found that almost half of all expats, or 47%, had lived abroad previously, and that’s a figure that is seen as likely to rise.

“What we do know is that global mobility is increasing, new markets are opening up, and inflation is increasing,” says AXA PPP’s Oliver.

“This means it is likely that the IPMI market is set to grow over the next five to ten years.”

A PwC report estimated that by 2020, the number of “international assignees” is expected to grow by 50% from 2009 levels, having already grown by 25% between 1998 and 2009.

Meanwhile, a shift away from the traditional pattern of expats moving from West to East has been observed, as more individuals from Eastern countries, such as China, Indonesia, Japan and Malaysia, buck the historic trends by emigrating to the West instead.

IPMI industry outlook

So what does the future hold for IPMI? Is it inevitable, given the increasing sophistication of medical treatments, that premiums will rise, and people be forced to accept less-good cover and hope they never need to use it; or will the measures insurers are taking to keep a rein on costs work?

Axa PPP’s Oliver believes the industry will face continued pressure to “offer sustainable pricing, to ensure customers will still be able to receive the treatment they need at a price that is affordable”, difficult as that will be for IPMI providers, which have to cope with “volatile” and variable costs.
Nevertheless, Oliver said the future for the IPMI industry is “bright”.

“As businesses become more global, so do their employees. We have seen a change in the roles employees take up abroad, as well as the amount of time spent on each assignment.

“Additionally, millennials may have an impact on the sector, as they have higher expectations to live and work abroad throughout their careers.

“Although the benefits package may not be as important to them as the experience, if companies want to retain the best talent, they will still need to provide some support.”

Andrew Apps, of Bellwood Prestbury, the IPMI brokers, shares Oliver’s outlook about the industry’s growth in terms of size, but notes that competition for the expat/international market is increasing.

“The market is no longer the domain of the big brand providers,” he says, as the industry’s smaller players play “an increasingly important role”.

“The ability to service a client efficiently and in a timely manner has never been more important. Those providers that are unable to adapt to being service led will find it increasingly difficult to compete.”

This story originally appeared in the November issue of International Investment.

Tomorrow, Part 2: The IPMI industry’s challenge:
providing great insurance coverage – at a price.